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  CSPAN    U.S. Senate    News/Business.  

    July 12, 2013
    5:00 - 7:00pm EDT  

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is obamacare ready for door family in your opinion? >> i would not only echo the point, but i would point out that the cost of coverage on the of aca exchanges and the higher than exists in the market for insurance so not only are we requiring the individual mandate but individuals and families purchase coverage requiring them to buy coverage that in many cases is two to three times the
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cost of coverage available today. >> for some the cost will go up dramatically. >> that's correct. >> you are not here a few years ago but you are hearing the history rewritten today. years ago the employer mandate was touted as one of the pillars of obamacare upon which the new law depends upon and every effort by eight republicans on the bias to eliminate the was greeted with outrage and claim that we are trying to gut obamacare. but today you hear a different story that the employer mandate is no big deal. really just an afterthought that has no impact on businesses like yours. and it is the greatest thing since sliced bread. is it your ability to hire and
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this a reprieve of what you seek is that what you think is a solution? >> i think it really doesn't do anything to address the problems of the mandate itself. the mandate does affect me although i'm not under it right now, it does prevent me from growing my business to become even larger. and as i told you for ten years i opened up about it comes out to about one and a half locations per year on average and i want it to grow forever but since 2008 i've slowed that down. >> how many people are you hiring blacks >> between ten and 25 people. the rest are part-timers and a business where i have a lot of first-time employees high school and college people or people who are just trying to make ends
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meet by getting a part-time job. so the full-timer's are not as numerous as the part-timers. >> so the employer mandate is in a small thing. >> it isn't a small thing at all. i have been nominated and selected as a franchiser of the year and i am very engaged with my franchise system and with the isa and business in general but i am embarrassed to say that i have no idea about the employer mandate on where to find information. i don't know where to report, what the requirements are and it's coming up. i know that. i still don't have any information on it and i'm upset to know i have to worry about all these things rather than grow my business. this takes up all my time now. i don't want to called mr. mcdermott but he said on the fourth of july he didn't spend his fourth of july worrying about the announcement and the changes. i did. i worked on the fourth of july and i worried about it and i field of calls from the other
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franchise asking what this meant on the fourth of july. >> thank you. i would point out the irs tax system is an honor system. at least the irs uses $10 million a year to enforce the honor system. the claim that the administration has been starved has no basis. in fact, the hhs used $8 billion to create out of thin air a bonus program for the medicare advantage, to postpone the cuts before the election. i wonder if they would like to have that $8 billion back now that they are claiming they don't have the ability to implement. >> can i add on to that? >> sure. with respect to the first question about the attack system being an honor system, certainly some parts are covered by reporting but many parts are not. and i would remind you that
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congress repeal the 1099 requirement that is supposed to take the small businesses away off the honor system with respect to the reporting purchases of goods of more than $600. and they projected the loss, $22 billion of the revenue by putting businesses on the honor system. the tax gap in the united states in 2006 was estimated to be $385 billion of uncollected taxes. those taxes were on collected because we recently had an honor system for many parts. >> what we are learning from the irs investigation is that our agents apparently are spending all their time pursuing political agendas rather than the enforcement of the current law. and again, obamacare, hhs they were made out of the air and got hammered on because they squandered that and simply has no claim again. back to the issue here is it fair to demand that the
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businesses, workers and their families have a government mandate when we have given them up for business? dr. mcdermott? >> thank you mr. chairman. it strikes me that the issue here is basically not about the delay. that is off the table. the real issue here is whether you want obamacare or not and are you going to do it or are you going to have any kind of mandate. from the very start, it is understood that for the system to work you have to have everybody in. justice scalia in his oral questioning on the case in the supreme court when asked when talking about the mandatory coverage provision he said my approach would be to say if you take the heart out of the statute of the statute is gone. there is going to be a deficit
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that is used to be made up by the mandatory provisions. all the money has to come from somewhere so you are put to a choice i guess. bankrupt the insurance companies and the whole system comes tumbling down or else enacting a federal subsidy program that the insurance companies would like. now it is clear that there's a difference between the employer mandate and the individual mandate. the individual mandate is the core of the issue. if we don't require americans, we are going to continue to have people who are free riders who walked into the argentine vroom come get taken care of, and you and i who have insurance paid for it. a thousand dollars a year. now with the system is doing is saying let's everybody pay what we can. and i listened and i really sorry that you had such a bad weekend. healthcare.gov is on the
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computer. you can look in there. there is a section for small business. i'm sure you've looked at it already and you can read obviously. so, you know what's there. explain what is really going to happen to the individuals when this is implemented in january as people were involved in september, october 1, what is going to happen to them? >> one thing i would like to point out to begin with is the individual mandate is already being phased in. so if we are trying to level the playing field that is what they are doing. the first sanction for not complying with the individual mandate is $95 again that is only if you don't fit in one of the many exemptions to the rule or you can afford health insurance otherwise. it is up over three years. we are essentially doing the same thing now. you don't have to comply the first year. you do have to get serious about
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compliance after that. so as far as leveling the playing field that is what the administration is doing although i am not sure that i appreciate the way they did it. in terms of what happens now, on october 1st the exchanges are going to open their doors. people who cannot afford health insurance, people who find insurance unaffordable, people who are eligible for medicaid can show up at the exchanges and sign up and there are going to be many insurers and agents and brokers and navigators and community and sisters and enrollment counselors and others try and to get them in the door to the i have a good friend at church who a week ago discussed she had a big lump on her back and went to see a doctor back in the emergency room and they said it could be cancer. i cannot. but you have to pay a quarter of my fee up front. she is on injured. as of january 1st she's going to be able to get health insurance and she's going to be able to get health insurance she can
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afford and get medical care. so that is what is going to happen. on the individual mandate a couple other -- >> how will they go about verifying whether she is eligible for the subsidy or not? >> she will go to the exchange and this is what came out in the rules and i frankly spend 18 hours on saturday reading the rules so if anybody wants to know what it says you can go to my blog at healthaffairs.org and it's there. the way it works for income is the first thing they will log in, the exchange will login to the data which will have information from the irs, from social security, homeland security. it will verify that the person is a citizen or legal resident and the amount of income that they reported in the prior year. if the income is essentially the same there isn't a problem so if they are reporting now the income is significantly decreased, the federal exchange which will operate in two-thirds
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of the state would ask for the verification of that. the state exchange for the first year have the flexibility of to been a statistical sampling. so they will for example of the people in the exchange they will ask for verification of income to relieve the burden from the state exchanges. however -- >> perhaps we can return to you in another line of question. >> thank you mr. chairman. i hate to see a dictatorship come into this country but it looks like that is what is happening with health care. many raised a concern or the impact of obamacare on the federal government and our budget. the criticism is there was over 1.8 trillion in spending and many were in fact budget gimmicks. they claim that the act would
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raise $80 billion administrative shut it down because they admitted that it was fiscally on sustainable. the congress repealed. the 1099 reporting requirement and outrageous reporting requirements on business that raised 22 billion. the congress repealed that. both the house and senate voted to repeal the medical device tax because it is costing jobs and hurting the medical innovation. that raised over 30 billion. now the employer mandate is the lead and lost at least 10 billion. in 2014 alone in penalties and as you pointed out, this never goes into effect. that's another 140 billion. with a lack of employer reporting there will be more errors and more subsidies so the cost of obamacare is just going up and up and up to date is obamacare now officially a fiscal time bomb and cannot be considered a drain on our economy and the american family? >> yes. the short answer is yes.
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there is always a fiscal time bomb if they made so that they are implementing something that was not passed. succumb as you indicated there is a health insurance tax enacted as part of law that applies only to the foley injured product but not the self insured plans. it is a distortion in the marketplace pushing a lot of people towards self insurance to avoid the tax. another bad idea it probably won't survive the long term. you mentioned the employer mandate at $140 billion which could be in question. the mandate is tied to it in a lot of ways. they are going to collect about $45 billion in the next decade from the individual mandate payment and at least in the first year i questioned whether they could collect the $2 billion. you now have a system it's hard to figure out if people have an affordable offer of coverage for their employer. there's a lot more people presumably getting subsidies
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that actually got in for the offer of coverage. finally coming you know they cut about $700 billion out of the medicare program as a part of this. that is essentially the double count of the money. they spend the money on the new entitlement program and counting on those reserves to the future medicare claims. so the whole thing was built on the house of cards. it isn't fiscally sustainable, and this is one more element that i think showed last year it was built that we can't count on. >> doctors like to get paid and i'm not sure that they are going to under this system. i remember when i was stationed in england in the air force as you know they have a system over there and i walked into the office with my son and they said are you paying? i said yes and we were ahead of about 100 people that are waiting out there. that's the way you make health care work.
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mr. capretta i think it is a time bomb and you said that can it be considered a drain on the economy and the american family? >> i think the announcement was a confession that it was. one thing that strikes me is that it is quite clear that the employers are going to the administration saying this is costing jobs. look at the data there is evidence. >> the allies that are trying to promote low wall but it is a bad idea to enforce this in 2014i can't imagine it's going to be a good idea in 2015 and so they will have a problem justify in making this a permanent part of all going forward since this is a burden on the economy and frankly the administration conceded this much. >> thank you. >> thank you. mr. thompson is recognized thank
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you for today's hearing and the witnesses for being here. i don't think that you can claim anybody is excited about this delay. i don't like the delay any more than anybody else. but i but suggest it's better to do the delay and get this right than to not do the delay and get it wrong. this is important stuff and i think it's important to point out that we didn't do health care reform because we didn't have anything else to do one day. we didn't wake up and say enough is going on let's do health care reform. health care reform was in response to the national crisis and i don't think that we can downplay that. we had folks that were not injured we all know that they were a sickness away from having no coverage at all.
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that is devastating to everybody including the business community. and we have a system where we had uncompensated care costs in every hospital in every district across the country. everyone had millions of lives of the annual uncompensated health care cost to the medical providers and to our hospitals. the system was broken and that is what we tried to fix. it's important to we get it right and it's important that we ensure folks and i believe we are going to hit other snags along the way to i don't think there is a program of the importance where this is inclined to be the case. but i know people across the country in my state in particular california are
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working hard to make sure that affordable health care and health care insurance or available to people who need it. mr. dennis you talked about business issues. what business de llewelyn? >> i am a senior fellow with of the research foundation. >> you mentioned some of the challenges businesses were facing. i can tell you without question the businesses in my district want this to work. you talked about the lack of information. doesn't your association provide its members with help in regards to many different programs including health care reform? >> absolutely. i've been to 15 to 20 different conferences.
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>> local chambers of commerce dewitt and other business associations do it. i've had a number of town hall meetings in my district for business folks, small-business owners to come in and get answers to these questions. >> excuse me, i have a limited amount of time. it's important that you do have these answers, and it's important for all of us to make sure that we work to provide those. do you see this delay in the employer responsibility provision impacting access to health care insurance in states like california who've been working diligently to set up their exchanges? >> i don't think this will have a significant impact. the delay of the individual mandate would have a significant impact. i need consumer representative to the national association of insurance commissioners and talked to a low of regulators
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and insurers and they would be very, very worried if the individual mandate would be delayed because as weak as it is, it is what is going to keep insurance markets from collapsing once would open the door to people with pre-existing conditions and offer federal tax credits to help people get injured. islamic mr. mcdermott had mentioned that one of the reasons this was postponed was a response to business requests. i know that you are not privy to discussions, but do you believe it is fair to say that one of the reasons is that they've been hearing from businesses? >> absolutely. i included in my testimony a statement by the six major associations like the employment benefits council that came out strongly affirming this when it was announced to this gimmick is this unprecedented?
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have administration's delayed the implementation? >> the administration has released a list of times when other administrations including the previous administration had the lead in the effective date. >> isn't this the case for the government i don't know what is? this wall is unraveling before our eyes to it i don't know how you can conclude that this isn't a total fiasco. i want to give you the chance to respond but you are a well-known budget and policy fiscal expert. give me the sense of what the administration was looking at as they solve this mandate unfolding from the perspective of what was going to do to the economy and health insurance markets. what were the estimates? i know there was a big study as
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to what would have happened to people once the mandate came about. was on the premise if you like we've got you can keep it and so for those of us that were here when i was written, it was never intended to go in to fill all to the it was a senate bill written basically on christmas eve with the intent to get into conference, then read write a tell-all, fix it with the house and pass a final version but because they lost the senate race in massachusetts and they didn't have the ability to go back again and pass the improved version they took the bill and the shoehorned that into the law which is what we have today. so we see all this happening. what do you think the administration is looking at
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happening in the market in your judgment because you look at the same numbers? >> i think they were looking at two things. if you go back and look at 2,009 of the doctor said about the design of this employer mandate i think the treasury department figured out it is not enforceable because of the massive data requirements they were imposing on employers across the country so they figured out it was way too much of a burden just to comply with employers having to file the forms of the insurance they were offering. it's a massive burden and employers are saying you've got to be kidding me. we have to change a free system in the country to comply? it isn't going to work. i think the treasury department figured that out and they said we can't do this. it's going to be devastating and a total mess. the second thing they are figuring out is they are stuck
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at this point because the of a massive system going in the exchanges and the reason the employer mandate was there in part is because they wanted to make sure that it wasn't huge out of the employer system. so that this mass of system in place to save you have a certain size you have a report and you have to provide the coverage. now that that is gone at least for one year they may be stuck with it's easier to dump their people into the exchange's. i'm not sure there is a lot of cynicism going around, but i really don't know if that is their game plan but certainly the employer mandate was put in there and part to create a fire wall as they called it are not the employer system and allow the leakage into the exchanges that would drive up the budgetary cost the treasury probably figured out that look, the burden we are going to impose for one year on the employer system was so much was going to cost jobs and was going to be very disruptive and was going to explode and actually not work. therefore they respect the rock
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and the hard place and pick the easy way out. we see the estimates where 20 to 60 million people could have lost their employer sponsored health insurance over a long period of time and got dumped into the exchanges. so, we have the exchanges where doubling and tripling the cost of insurance through the regulations were imposing higher health entrance cost some people but we will subsidize them with taxpayer dollars so make it more expensive and then subsidize it so that the consumer doesn't feel it twice as much and the taxpayer bears the burden, the employer has the mandate, the employer has a greater incentive to stop offering health insurance to their employees. most employers are sitting around the table thinking if my competitor is going to drop health insurance and put their employees in the exchange all i have to do is pay $2,000 per
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person tax index and inflation? versus ten to $20,000 a family plan once an employer makes the decision isn't long after that the competitors will have to make the same decision and dump their employees into the exchange and the costs are going to explode. mr. johnson walk you through the charade of the pace for. i can't see that this ruling right here will do nothing more than further exploit the cost of this thing. >> so much more i can get into. >> time is expired. >> i want to thank the panelists for the testimony. i think it's helpful for us to have these discussions and i especially appreciated your testimony today. the challenge that you are facing is a small-business owner but to my good friend from wisconsin, the same point can be made on the opposite side to it i was back home last week as we all were for the fourth of july and i met with a small-business owner with 55 employees who says i'm glad there was an employer
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mandate because as a small-business owner when i first created this business i bent over backwards to make sure that my employers have affordable health insurance coverage and right now i live down the street and i have competitors who aren't doing it. and these providing affordable coverage with 55 employees because they think it is the right thing to do. it helps with recruitment and retention and he feels it is the right thing to do for his employees. in fact over 95% of the business is over 50 are already providing coverage to even though there is no requirement for them to do so because they give me a business calculation that is in their best interest for the recruitment and retention and because it is the right thing to do to try to provide health insurance coverage. so i think the same argument can be made on the other side. and you said that you have 43 employees. are you right now providing health care coverage for them? spent over 100 employees it is the equivalent and yes i do provide for my full-time employees. i don't think the argument is
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there. it is more the mandate and the reporting of the requirements. >> but you are providing coverage. >> let me ask the panel right down the line a simple question. what is your recommendation for this congress to repeal the affordable care act or to fix certain features to make it work better? >> i think that repealing and replacing the affordable care act would be an optimal policy of come. >> what is your recommendation? to fully repealed? >> the recommendation to the congress. >> it doesn't get replaced. i think there are some things that need to be fixed and they can be fixed if the congress would set their mind to it to estimate the best political vice you are going to face to critics in life, people who criticize you because they want to see you do better and those who criticize you because they want to see you fail.
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that's the major obstacle would be affordable care act faces today. if there is so much opposition to see that this fails and not whether this is to help small businesses or help americans throughout the country and the affordable care act today. it became the basis of the health insurance exchanges they were fully supportive of it. we didn't have an employer mandate as part of the legislation, but when i introduced the bill there were an equal number of republicans and democrats that supported. now you have had seven states report back with the rate would be for the small businesses entering the shop exchanges and they are coming in below with the current rates are and that's because it sets up the competition and transparency. then finally in powering the small businesses to have the
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same leverage. do you know what percentage of your membership has 50 or fewer employees? >> 50 or fewer? probably dealing with about 85%, something like that. >> i guess we ran off the list but it shows those with 40 or more employees. >> while 93% or below 50, 50 employees they aren't even going to be impacted right now on the employee's -- the employer mandate, is that right? >> what information are you sending out to the members in terms of the affordable care act today? >> we have a whole series of programs where we try to disseminate information to the members printed as well as calling conference type things. we send this staff out. >> i'm glad you're doing it because there is a lot of
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misinformation being sent out. i think deliberately again to scare them and make sure it feels. are you also a member? >> no, i'm not. >> i didn't want to put you on the spot. he did point out that we have got health care dhaka of and there are a lot of sites the small businesses can go to to get just the fact. that's what i'm hearing from the folks back home more than ever. we want the fact of what is happening and what we need to do to prepare for this coming up and so if we can just focus on that and have honest conversations like we are trying to have today i think all of us would be better off. thank you. >> time is expired. >> i would say if republicans want health care to be successful, they want american people to have good quality health care. and what we see this as is not about some political issue about having the bill failed.
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we see this as definitely something that the bonds towards socialism, socialism is known around the globe to failed time and time again. so i would remind my friends on the other side of the all as you may remember from the 2008 these were the claims that we were making to centralize the health care system in washington which has failed around the globe. so, we want to improve health care. now i have a question that i am going to give to mr. capretta. i don't know what part of law the administration is using to allow to say that this mandate on the employer side can just be ignored and i don't know why my friends on the other side of the title are insisting that all is followed. so, do you know what waiver they use and what part of the affordable care act or obamacare was used and what are they
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citing to eventually weigh this requirement? >> in the blog post that has been referenced, they cite the reporting requirements where they are going for the delay. so they are not actually going into the structure of the mandate itself to say that it can be delayed. they are going to the section that requires employees, but there has been an increase and by your leadership in the house to the president and his team asking that very question but i think they've been asked by the press and they haven't responded yet. there is no official response on the administration about the reasoning about how they could do this. >> what is your personal opinion? >> my personal opinion, not a lawyer let me stipulate that. he can answer some questions on the legal part of it but i think it is quite obvious on its face this isn't what the congress intended. whatever the legal -- however they might stretch the statute to say we can interpret this and
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this wasn't intended. they were supposed to go into effect in 2014 and the established the reporting system to go into effect. if you read the statute is pretty obvious that is what was intended. i don't know whether they can stretch the language to do something different. >> there was a report on this yesterday and a reference to an earlier report that referenced the track case which is the leading case in this area. the irs is relying on the of rulemaking authority and what the case said which is the d.c. circuit case which is the leading case in this area is that when the question arises as to whether an administration can delay the enforcement of the law and is subject to a rule of reason where the conference provided a timetable or other indication that may supply content of the when the d.c. circuit and several other circuits the court has held that doesn't make it an absolute
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requirement. but other things that can be considered are whether or not there would damage to human health and welfare. whether the court could consider the expediting delayed action or other agency activities. so i think looking at the judicial legal authority here. >> so the unions have been running waivers and other special interests have been granted waivers and now you've done an employer waiver. why can't you do an individual waiver? >> i am not sure what you are referring to. there was a waiver that was included in the statute for the delay of the annual limits requirement and some of them received a delay under that although a lot of businesses did as well.
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>> can the white house to grant an individual weaver? >> that's my question. the individual mandate. >> it permits a hardship waiver and in the regulations published about a week or two ago the administration interpreted that very broadly. there would be many people who would qualify the hardship, but of course there are already seven or eight other exemptions including for everybody that cannot afford coverage. so the individual mandate has been very widely misunderstood. it's not a requirement -- >> why not just individual mandate at the same time? >> because people who can afford health insurance ought to buy health insurance. they ought not to wait until they get sick and then assume that their neighbors will take care of them. it is an individual responsibility requirement. >> mandated by the government. that's not individual responsible that your individual liberty blacks >> requires car insurance.
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>> mr. pascrell? >> mr. chairman, when all else fails there are red flags. socialism, apocalypse now, and we heard again just recently weigel i resent the fact that first of all, you have accused of those folks who sat at or after our. months after months listen to many people on this issue. there is not a piece of legislation that ever came through the body that was perfect. so we need change. you cannot deny that obamacare is helping millions of americans if you on the chapter and verse i will give it to you. you cannot deny that they offer health insurance even without a
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mandate. and the small business is would be xm to. you have no ideas on health reform yourself. in fact those you put before the congress you're own party rejected. so you cannot have it both ways. more important it's better to be right than fast and you know that better than anybody on this panel. things change. things need to be corrected. so when you say the information isn't existing, i will give you the information in print. >> i didn't say that it didn't exist. >> while it's here. in fact on the first page of the regulations, and which you refer to you didn't have it looked at any way it is a very interesting part of a legislation, the medical loss ratio. do you know what that is? let me tell you the medical loss
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ratio is coming and that is the insurance companies now must provide and spend a specified a number of dollars on medical care which they never had to do before. this is a very critical to everybody. a lot of good things in this legislation. i'm glad you are the only panelist on the left that said if it can't be fixed, then maybe i would have repealed. this is all about repeal. they don't want to change it. they want to do away from it. the supreme court decision has been rendered. we are going to continue to try to do away which is reforming health care now, the more than
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95% of businesses are small businesses. they got fewer than 50 employees that wouldn't be subject to this mandate. do you agree so far? >> notte subject isn't a static term because they grow -- >> do you agree or disagree? >> i disagree. >> good. and approximately 200,000 large businesses with more than 50 employees are subject to the employer responsibility requirement. of these, 200,000 large employees at least 95% already offer health insurance to their employees. do you agree with that statement? you agree? do you agree with that? >> i do agree to it but as i mentioned that doesn't mean that all of those employees are covered. >> what do you mean by that? >> 95% or 97% of businesses as i mentioned in my remarks 97% to offer health benefits, but not
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necessarily to all employees. a significant number of the uninsured are actually people employed by those firms. >> do you think it seems likely that the employees who currently offer coverage right now would start dropping their health insurance all of a sudden? >> nope. >> why not? >> if they think is going to come back. >> i have been hearing you over here but -- >> the main reason employers offer health insurance is for the recruitment and retention. they expect health insurance. another reason is there are huge tax subsidies that are already there which was mentioned by mr. capretta. if we wanted to have the largest tax increase in american history by abolishing the employer tax deductions and exclusions, we could talk about that. i'm not sure that other members of the committee want to do that. >> do you agree with mr. speed
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jost? and i agree to move to an individual lead sponsor system to reduce the mix between mr. chairman. >> are we looking for perfect in response to my friend from new jersey? we are not looking for a perfect to be offered for the amendment when we were in the minority that were swatted away by the majority late into the night, not considered, not about it. many of them more thoughtful attempt to improve the bill. so we are not looking for perfect. what we are looking for is a reasonable characterization. what was promised to the american public by the united states is you get to keep your physician. if you like and you get to keep them is that right? average health care costs were going to go down $2,500 a year. remember that? so we are looking for a reasonable assimilation of the representation to the public by
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the president of the united states and his administration in the course of the date that is long gone this far in the distance that is never going to happen. and so now here we are and we are debating and we are considering what is clearly an embarrassment. it's an embarrassment that we could see a foreshadowing of when the then speaker of the house nancy pelosi said this out loud. she said we have to pass this bill so that you can see what is a net. she doesn't disappoint. and here we are. so now we have a situation where he essentially the administration for years has been pumping sunshine. the administration when asked how are you doing this exactly? how is this coming to fruition? and this committee and all sorts of public representations have been told it's fine. it's great.
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we've got it under control. in fact we have a wonderful plan for your life and it's going to be absolutely terrific. now what happens? thank cahal the weekend the administration on the blog post essentially whispers it's not working. this is a mess. you may not be able to hear me but the whole country heard that whisper and as a blog post to go check websites. it's ridiculous. so now here we are and i have a prediction to make. bye prediction is the obamacare statute, the affordable care act as it has been enacted is unsustainable. it's unsustainable because of the whole host of reasons.
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the architecture is fundamentally flawed and it is an edifice that is now wavering. one of two things is going to happen. many of the proponents, not all that many of the proponents of obamacare their hearts desire is a single payer system and they will tell you they had met that during the course they couldn't get a single pay. the fallback position was the public auction. they couldn't get the public auction. so all that was obamacare that is their heart's desire is a single pay system to aid that is one way that this could go. the other way that they could go -- and it's my hope that it goes in a very different reduction. that is towards the consumer oriented health care system. do we want to repeal this? absolutely we want to repeal this and the red herring argument that we heard a couple of minutes ago from my friend from wisconsin was that somehow a desire to see something fail
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is somehow an unjust. what we want is to see health care improved but we have a different vision that was blocked out during the debate in this committee in this room late at night during the debate on obamacare. but now what is coming to fruition and we have an opportunity to render this and my sense is that the public is waking up. the public has an awareness. there was a false claim and they want to redeem it now that false claim and revisit the false representation was made to them. and it is their hope that this congress as part of the solution. i have every confidence we can do this and that we can have a patient oriented consumer health care that empowers patient and physicians to meet one another and have an absolutely terrific system without the big government telling us what is right and what is wrong. i yield back. >> thank you.
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>> you extended to allow me to principate in these important hearings. and to my friend and colleague, mr. roskam, i joined with the sunshine pumpers. that is what we are, we try to improve the quality-of-life for americans and we have these hearings to see whether or not the storms and impediments to see whether or not we are doing the right thing. and so i want to welcome all of you to make certain that if we are on the wrong track, and you can help us in the work that we are doing as the congress. now it is my basic understanding that with an exception of mr. jost, the other witnesses support and repeal so no
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sunshine pushers if you believe we are to get rid of this. and i assume with the exception of mr. faulk car right now none of you have a small business. you don't make payrolls, you don't have responsibilities for health care and pension benefits; is that correct? and i would assume further you are not just volunteering your thoughts. you are experts in what you do unlike mr. faulk and you get paid for the same thing you do the same way that doctors and lawyers get paid. it wouldn't be a stigma pitting it would just be illegal as to what the business is. am i correct in that assumption? >> no, i'm not a lobbyist. i am a senior fellow at the manhattan institute that is in on policy research institute,
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where i've actually articulated alternatives to the affordable care act. >> from the universal coverage. >> you are extremely qualified and research. i've read that. but you don't get paid to take a position -- other words, you wouldn't be here in your research out that if you were supporting were trying to improve health care. you are here basically -- your income is based on the fact that that is your professional position. >> i would strongly disagree with you. i articulate it -- >> don't disagree, just -- >> my positions on the record. a i read in every day on the internet and i not only advocated -- >> i'm asking whether you get paid for advocating a position to be a i don't doubt that your professional. >> i don't get advocated on any position. >> if you were working for the person there was running for president, did you get paid for
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advocating a health position with him? >> no, i did not. >> you are a volunteer professional? >> i volunteered for the romney campaign, yes. >> and positions that you take on health care, you don't get compensated. >> i don't get paid for any particular piece of legislation. >> so what you're doing is voluntary -- you are helping the committee and others understand your position. you are not a doctor when you do have a professional position, right? >> i have articulated my view about the affordable care at -- >> the only person that i am concerned with is mr. falk, because it appears to me that it is his opinion that would help us understand better what we have done and how we can do a better. and incidentally, my son is a marine and i cannot say anything unkind except simplify because you guys are the marines and i
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want to thank you for your service. but whatever they put in your water i can understand that you are just as excited about your business as you have been for serving our great country. i want to thank you for your service. for all of the people that you tired, approximately part-time and full-time, what is the breakout on that? i know you have more part-time and full-time. >> absolutely probably 15% of employees or full-time, but that is by choice. most of the people why employee or full-time employees to be they are high school, college kids. >> if you needed full-time, you would hire full-time. >> absolutely. i offer -- >> supply and demand. >> as many hours as they want. >> he said those that work, they get health care. >> i offer health care to them. >> they accept that? >> not all the time. >> you all for it not because you are a nice guy but it's part
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of business, isn't it come to make sure the workers have access to health care? >> it is because i am a nice guy and it's good for business. it's about providing an opportunity for my employees. i want to take care of them because they are valuable to me. >> all time is expired. >> can i just ask one concluding question mr. sherman? >> you can submit that in writing. >> that being said i can't. >> that would be the correct assumption. >> i would like to point out your qualifications to be a none of you are in question today. you may have different views and beliefs, but because you care about the issue, you are experts on the issue and impacted the issue and on behalf of the committee we are pleased that you are here with us today. >> i join the chairman and his observation. >> thank you mr. chairman. first, mr. roy and mr. capretta to a question if we can. we haven't talked much about this during the hearing.
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but since the enactment of obamacare to this point when the employer mandate has been temporarily suspended for year, what you think the overall impact of the enactment have on gdp growth relative and also add mr. dennis as well what is your thought on the impact of the slow growth we have had on gdp over the past few years relative to the implementation or the proposed implementation of this enactment, what impact does it have on the decisions of the business, the job creators, relative to the decision to hire and expand? >> i don't think that i've seen an academic estimate of that. it's necessarily a subjective kind of response i'm going to have to give. there's been a lot of information coming through the system even the federal reserve levels but noted that employers are responding to the incentive of the health care law by limiting the hiring that they
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are doing. so, if the direction is clear it is negative but the size and quantity that is harder for me to put a member on that. i would say there have been many reasons why the economy had performed poorly in the post recession period but this isn't one of the reasons. i would add that what we have seen is a substantial shift from the full-time employment to part-time employment so we have record high numbers of people that are part-time workers and low were members on full-time workers and that is a transition that i would expect to continue as small and medium-sized employers wrestle with the mandate. another reason that it would be a great policy to repeal the employer mandate. >> mr. dennis? >> no, we keep the data monthly on the status of the small business economy. it's been quite clear that over the last few years things
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haven't gone well. the difficulty is, and that is since 2010. the difficulty is trying to pull out what is the macroeconomic issue from the problems put forth by obamacare. we simply just cannot tear them apart as to what has clearly had some impact on their general view of the requirements that are before them and the cost that is before them. we do have some data suggesting recently that they are becoming increasingly concerned about political issues rather than economic issues as an impediment to their growth. but political is injury wide term and could be a whole series of things. >> mr. falk, you indicated that you think it's important to provide health insurance to your
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full-time employees. and you also indicated that your part-time employees are offered the opportunity to work more hours if they want to. does that working more hours at some point lead to the prospect that you might get to the point that you hit 50 employee threshold, and if so what that means for the the devotee to conduct your business and you're 12 units. >> well, definitely is something i take into consideration current site i don't think that i will go over that threshold immediately. >> and what has been happening with your current insurance premiums over the past few years for the insurance you are providing? has that been steady or going down? >> every year it's gone up. it isn't a myth that my insurance premiums for many employees that we share the premium though i still pay the majority it costs me more and cost them for every year.
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>> cannot be tied to the continued pressure of the requirement that the health insurance industry continues to pay billions of dollars worth of assessments to the federal government each year which in turn gets passed on to the employers to pay those premiums to the insurance company? the lifting of the policy cap part of the enactment, the extension of coverage to those 26 years of age, you think all of the factors as they continue on obamacare land themselves to increase in premiums for the job creator on the street? >> no, i don't know. mr. rangel was very good in pointing out all these other panel members are experts on what they do in health care. if i were to tell them that they have until july to get all the businesses up and running and there was a website they could go to to figure out i'm sure they would be overwhelmed as well. statistics of all of my time. >> thank you. >> thank you mr. chairman. i commend you for holding this
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hearing. this is an important topic as we move forward with the calamity that is confronting the country right now. just to set the record straight, republicans are for health reform, we are for positive health reform and reform that recognizes the patients and families and doctors ought to be making decisions so wonderful positive solutions and i am sorry that my friend from new jersey has left but i will remind him as i did not last hearing that a chart 2300 is there and i would encourage him to take a peek at it and it embraces those positive solutions. mr. kind talked about this being all weld politics. now you talk about politics. here is an announcement from the administration coming out on the blog post from the irs. it will post. so now we have the government by blog post i guess that the lay the reporting requirements. they don't delay the law, the delay the reporting requirements for the employers for a year
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that just so happens to fall after the 2014 election. talk about politics. i would encourage my friends to open their eyes to the political activity in the administration. mr. jost, you said, quote, if you actually care you would throw more money at this program. but with all due respect, if the individuals that wrote law actually cared about the health care of the country they might have investigated the consequences for the physicians taking care of those patient as i did for over 20 years. they might talk to folks like mr. falk out there trying to run a business and create jobs instead of doing what we have clearly identified and has been admitted to light trucks on the other side when the on a stand behind closed doors that this wasn't to be the final product and as mr. ryan talked about.
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.. that target continues to move, and with every new policy or extension or waiver or consideration that they're giving to somebody else, i still don't know what to do. he's right. they're is a bad side out there. you just have -- it just announced publicly. and a stand that. we will go there and look at all the information, but i'm engaged. i am here.
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nike these events. conferences on business. they're probably 75 percent of small business owners to have no idea what's going on. they don't know about health care. >> i've been there. it's a wonderful, beautiful sight, but it does not do a thing to assist you. when you spend all this time trying to up comply with government regulations like this in rules that are incomprehensible, but was the consequence to your employers, employees and your business and job creation? >> again, all these guys are experts but the really are creating any jobs. on trying to create jobs in, business. right now i'm fortunate enough to be a large enough small business owner that i have an operations manager and then the minister of the system but don't have a government relations person on my staff like microsoft has as mr. mcdermott talked about earlier. i have to shoulder all of these
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burdens to find out what is going on with health care and how it's going to affect me, my employees, and my business. my business is what provides me in income for my family. the profit that i make. if these costs continue to take up the profit i'm going to a decide in the aggro or to close some of my lower performing units because they're just not going to make enough money. therefore it's going to take jobs away. >> exactly. i want to touch on the point that you're making about part-time workers. i've had employers in my community tommy their decreasing the number of full-time workers to part-time because of the slot . 322,000 increase in part-time workers, voluntary part-time workers. can you describe the consequence that is having in the real world, bring about increase in part-time workers and how destructive that is a jobs? >> we heard a lot of talk today about what the right thing to do is our what employers terrific care. not heard a lot about what the
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incentives are, and the incentives are very clear. restructure to part-time workers because then you don't have to offer coverage. that is just as plain as day, economic incentive. that is what -- >> your time has expired. >> thank you. >> thank you, mr. chairman. i want to mention, 30 years before i got here, we have two chambers in our area. two dozen teach in sarasota and nancy county. 93% to 90 percent of 50 employees and less. the u.s., florida chamber, i was very active, 137,000 businesses in that chamber. 93 percent or less, 50 employees and less. the number one issue, your comments on this, the number one issue is the rising cost of health care. in our area we had one employer.
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someone successful. his cost last year when up a million five. the other end of the spectrum, and i do with when we do town halls, which she stood up and said six employees. my health care cost has gone from 1,000 to $2,000 for a family of four. that is crazy. it's unbelievable. they say it will cut the cost 25%. i'm just looking a reality. a lot of businesses that if they get the bill every year, a pharmacist from his bill came in, 27 percent increase. he negotiated out 12%. employs a cooking in more. the coverage is not quite as good. they get it down to about 4%. that is a reality. this is doing nothing to bend the cost of health care in the last three years, even though it's just come down. i want to get your point.
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that's what i see in our area. the uncertainty the people a feeling about not expanding, growing, creating jobs. health care costs already has are is going to double or triple. is that what you said? white is a health care costs are going up substantially? give me a little more background on where you give your information from. >> the cost of health insurance is increasing for everyone, but it is going to particularly increase for people who shop for coverage for themselves. that is where the affordable care act heavy regulation of the individual insurance market will drive up the cost of insurance plans by two to three times for some workers. on an average of 65. >> your say york firm might pay what now based upon your numbers? >> for example, a state of california where i have done extensive research the average increase for unsubsidized individuals shopping for encourage will increase by about
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70%. >> that's what i'm here. i want to first to applaud you because we need in this country to be competitive with china and india, more startups, and entrepreneurs, willing to take risk, willing to sign and know that the bank and put everything in risk. i applaud you for what your doing. you said something about planning. everybody that's in this, all is done some kind of planning in terms -- one of the factors as the uncertainty factor, one of the factors is cost going four for employees. it used to be 22%. now when you hired some 50,000, you have to figure almost 40 percent in terms of his experience. the terms of your business, from many jobs you think you have maybe not creator businesses you might not have opened as a result of dealing with the uncertainty? >> as i said, from 1998 until 2008, about one that -- on
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average from 2000 until today. opened up two locations. that was just last year. i would say that i probably could have opened up another six to eight locations as i get bigger i could probably move a little bit more aggressively. all of the regulation changes that happen, not just with the mca, but taxation and everything else. the most important regulation right now on my mind. >> i was going to mention, you said multiple entities. how many -- is that a huge issue within the nfib? is that more of the bottom? a lot of people out of business. family related. the sun as a business. they're very concerned, again, but the uncertainty. >> the truth is we don't know
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exactly how big it is. what i call a sleeper issue because we just don't know exactly how much, how broad is extends. for example, of all small businesses that have topped zero more employees to mothers only about 35 percent of those that have a single owner. rest of the high multiple owners. then you talk about business owners themselves, and 9 percent of them on multiple businesses. and they do this and combinations. and -- >> time has expired. >> thank you, mr. chairman. >> you're welcome. >> thank you, mr. chairman and of our witnesses. another you have a great perspective and expertise on both sides of the issue. these are discussions that i think are healthy and need to be have. reno that the american people want our health care system to work.
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there is growing skepticism that the more the government gets involved the margins of it becomes. actually, people can be harmed. that is a growing concern and one that i think we all share. you're an expert on the president's health care bill. i can appreciate that. i think you probably study the upper great deal. this component that we discussed today we hear told is not ready for enforcement. do you think there are other components that my share the same view of yours or other other parts that perhaps you think need to be delayed as well? >> i think the administration right now is at trio rushed. seriously, they do not have the resources to implement all of the provisions on time. >> so it's a lack of resources? >> much of it is a lack of resource. another part of it is the way this was intended to be
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implemented the states are going to take much of the responsibility for political reasons the states have declined to do that, so the administration has and is up with a much bigger job than they otherwise would have had. they're under a lot of pressure, trying to decide what is to be done right now, what can wait a little bit. there have been of the provisions. another provision that relates to business, not discrimination in favor of highly compensated employee provisions. for businesses that are insured, they cannot offer a different package to their highly compensated employees. that raises a lot of difficult issues, which we could probably spend another hearing talking about, but that provision fortunately says nothing happens until the put of regulation. they're trying to figure that out. that will interface with this one. i think that they have decided -- then don't talk to me any more than a talk to you. i think they have decided that
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they're going to focus on what is absolutely essential, the premium tax credit dry the individual mandate to keep the insurance market from collapsing committing the exchange upon running command things like -- >> when he said the premium tax credit, small business tax credit that i constantly hear from folks back home that is so complex? >> this is the individual tax credit. the small business tax credit is out there. >> to you feel that a lot of small businesses are eager to take advantage of that and find it to be an efficient use of resources? >> a nonprofit that my wife is on the board of has taken advantage of that and found that it has allowed them to extend insurance to their employees. a lot of other small businesses have, but you're right, many have found that it is limited to small business, very small business with very low-wage employees. it does not apply to a lot of businesses. i think the administration is moving ahead with the resources they have and the time they have
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to do the essential which is to get health insurance to people who are uninsured and to need health care. >> thank you. if you could reflect a bit perhaps on the small business perspective on the small business tax credit, the feedback i get from constituents is that it is much more hassle than it is worth only add to the complexity of our already very overly complex tax cut. >> yes. the small business tax credit has -- but don't know whether i would want to call it totally a fiasco but as i felt very much. and a good part of the reason was that it was not structured very well, i think. it is very complex. the second one is, a bit of a bait and switch in the sense that it brings you in and gives you credit for a while.
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after oral it goes away. so it gives you this incentive to make an obligation, if you will. once you made the obligation then it is gone. so it has not been successful in the sense of very few people or very few businesses have to convince of it. there have been a few businesses that have taken advantage of it. in all likelihood there would have been offering health care . it was enough, apparently, for the stimulus to a bottle of it. >> thank you. i yield back. >> they do, chairman. at think the panel for being here and especially want to talk about small business. when you look at this activity is taking place right now -- and i think the piece that is missing most more than any other is the relationships that you build with the folks that work with you, being an employer and
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having a secedes we have 110, 115 people. but the relationship is different. it's not like a machine, a piece of equipment. it is a person. over talking about today is people. or talking about, is it fair for everybody? does it make sense for the american people. is it really providing what it was supposed to provide? because the infrastructure can be put in place balance being delayed. it's not being waylaid but delayed. because people need to understand, you, as an individual. your good guy. usher the people that you pay every two weeks, the sixth of 21st, they become a good guy, but only if i can pay them. it now works for me because they like me. they work for me because they like me but additionally can provide for the families. this piece of legislation has made it so difficult for people that get up every day and all
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walks into congress but to their business and have to worry about payday and have to worry. you have to sign the front half of the checks of your employees can sign the back half. and that better deal to work. in the think what is missing here -- and i really find it unusual that an outfit that is turning $17 trillion in the red is able to sit down and give anybody's business advice. give me a break. now, most of the things that we run, small businesses, are not only family-owned but operated. i have to tell you, i've been to baptisms, first communions, weddings, and nevelson to funerals. we follow each other the whole way through life. these are people. these people that we get to know. they're part of who we are and that is what parts of -- part of what makes a successful. this separates you. you're no longer your will to be as good guy.
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he now your dad is keeping them from attending something because the government mandated it be done. no employee mandate, you know at sorry about that. it's not because small-business is ask for it but there is no infrastructure in place to handle it. be a little bit honest about this. huntington american people have witnesses and have no that if it was like a duck and quacks like a duck, at the back. this is a bad piece of legislation that does not serve its purpose sense of my colleague said it feel like you have you can keep it. if you want to sit down, and 65. phelan to sit down and decide of my medical future is, forget that deal. that won't happen. your company hours a week? >> a ers. >> and i know. where open the fourth of july to
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but it's not just about that. we know you do work half days and it doesn't matter. some days you have to work a little over time, but you live it. that's my point. we have driven a wedge between the people who work with you, work for you, work toward your mutual -- its mutual success. tell me how hard is. there is so much uncertainty with this. this is what makes it difficult. we don't know. tomorrow, what's the next shoe to drop? what else will they hold back? >> it's not just that there is regulatory uncertainty because the law makes so many dramatic changes to the lead employers deliver health insurance. the regulation seven coming out piece by piece and contradicting each other. for example -- and this is not even about small-business. the states that have been trying to row of these exchanges, usually democratic states. these democratic states, these exchange directors are saying we
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designed the exchange, build the exchange, and then hhs comes along and changes color regulation about how it must be designed and a half to go back and start over. that happened so many times in the last of the 24 months that a certain point a lot of these exchange erectors said we give up. it will ignore it into a set of the exchange because if we don't we will meet the october 1 deadline. so it's not merely that the law is poorly designed and businesses are facing this, individuals are facing this domestic government. the law is so complex and difficult to the minister and the employer mandate is exhibit a -- >> and that's why. it's a relationship that exists between the owner of the business and those folks that work with them in a common effort to be successful. both parties participated in in both parties benefit from. >> it's going to be hard. >> time has expired. i would like to thank our witnesses for the testimony. this is been an eye opening
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discussion. clearly we need to get real interest. we will do so next week. as a reminder, any member wishing to submit a question for the record will have 14 good -- 14 days. any questions, i asked when the sisters on the timely manner. with that, thank you. the committee is adjourned. [inaudible conversations] >> taking a look at congress next week, the house is in on tuesday with work next week on a bill that would delay for one year the employer and individual mandate called for under the health care law. members will also take up legislation from the department of defense in 2014. the senate returns monday at 2:00 eastern for generals beaches. later in the day senators from both parties will meet in the old senate chamber to further discuss proposed changes to filibuster rules. yesterday at the speed of grows among party leaders regarding the delay in the senate's
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consideration of the president's executive nominees. then afternoon majority leader harry reid took steps to set up votes and cut off debate on a number of those nominations, including top spot to the labor department, the informal protection agency, and the consumer financial protection bureau. watch live on c-span2, the house on c-span. today the heritage foundation held a discussion of proposed changes to the senate filibuster rule. we heard about the so-called nuclear option which allows the senate to lower the 60 vote threshold to end filibusters on judicial and executive branch nominations. here's a look. >> now, it is true that right now senator reid does not have 60 votes in his caucus, and he is supposedly going to use the
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nuclear option to change all the now, this is not the first time that this issue is,. when senator phil frist was the senate majority leader and was being frustrated by votes on judicial nominations, he proposed the nuclear option, and the result was that a gain of 14, seven republicans and seven democrats work together and came to the floor and said no. we are not going down the road. and that was enough to stop senator fritz.
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i would hope that as a result of the caucus on monday night there might be a similar group that would come to the floor and say, do not go down this road. i could tell you, having seen what happened in 1975 when the senate did go down the road, the repercussions lasted for years in. in the bitterness lasted for years. it is not something i would never wish for the united states senate. the senate is an institution that i love. i worked there for 35 years of. i know teach about how congress works at george washington university, and i honor the
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senate. i can remember, frankly, that win this was proposed by senator frist of went on the cbs evening news and suggested that as a group of senators to come to the floor and say stop the madness, we could stop. that is exactly what happened. and that is what stopped senator frist. i sincerely hope that that is what happens after that caucus on monday night. a group comes to the floor and says stop the madness. >> i was a portion of an event held earlier today at the heritage foundation. you can see the entire discussion tonight at 8:00 eastern when a companion network
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c-span. this weekend on this c-span was president obama and firstly michele obama at this year's national medal of arts and humanities ceremony at the white house. participants include george lucas and former u.s. poet laureate k ryan tomorrow night in:00 eastern. sunday morning at ease back -- on c-span fbi director nominee testifies before the senate judiciary committee during his confirmation hearing this past week. formerly served as a u.s. attorney for the southern district of new york and as deputy attorney general during the george w. bush of ministration, nearly resigning in 2004 over concerns he raised about electronic surveillance orders he thought to be illegal. the administration eventually halted the program. watch his testimony before congress sunday morning at 1030
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on c-span. the senate agricultural committee held a hearing wednesday to review the pending purchase of smith of bell foods pork producer and processing company by sean way international, a chinese food company. witnesses included the ceo of smithfield foods and a commissioner for the u.s.-china economic and security review commission which monitors and investigates national security concerns involving u.s. and china trade and economic relationship. this hearing is an hour and 40 minutes. >> the senate committee on agricultural and forestry will come to order. want to take a moment for our committee members to say again how proud i am of this committee in working together in a bipartisan way to pass the farm bill -- farm bill not once but twice, two different this thing was ranking members. we know there are some challenges in the other body,
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but i am confident that the leaders and from models that we have been working together will ultimately prevail. so i just want to thank everyone for working hard, listing to each other, being willing to make compromises in the interest of passing a bill and making agreements and sticking to them and working hard. and so senator cochran, want to thank you for your role. i am proud that we have been able to get that done. from the very beginning of human history we have seen civilizations rise and fall based on their ability to feed their people. that is why food security is absolutely essential to national security. it's why food and agriculture are such an important and unique part of our american economy. not a day goes by that everyone of us in this room was reminded
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of the importance of safe, affordable, and abundant food supply. it can be easy for americans to forget that food does not just show up in the garage stores. sometimes i feel we have to remind people of that. it's a process that requires risk-taking, sound business practices, and a whole lot of hard work from the 60 million people whose jobs rely on agriculture. that is why the news of the proposed purchase raises so many questions. smithfield might be the first acquisition of a major food and beverage cultural company, but the data will be a last. that's why we must take on long-term view of what is happening. we need to be having this conversation and evaluating what is in the best interest of american families and our
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american economy. the importance of our food supply and security and safety cannot be underestimated. first is our approval process adequate to handle issues unique to a food security and safety? important question. this is a precedent-setting case and we owe it to consumers and producers and workers to ensure we're asking the right questions and evaluating the long-term implications. last week senator cochran and nylon with the number of members of this committee urged the secretary of treasury to include the u.s. al qaeda and the fbi in the review process of this transaction by the committee on foreign investment in the united states. that's why we will be meeting later today with officials from the department of treasury in conjunction with the banking committee so that senators can get briefed on the process.
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we also ask that this be the process for the future for transactions involving the food supply. .. >> we need to be evaluating the long-term market implications for the deal for american workers, pork producers, and the
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farmers who grow grain and feed ingredients. despite the strength of america's pork sector, smithfield has been struggling to make a profit, and yet they are offering a 30% premium for the company. that, to me, raises questions about economic motivations of the purchase. are they focused on acquiring smithfield's technology developed with considerable assistance from u.s. taxpayers? as with all our food companies, smithfield benefited from years of public investments improving food rations, living conditions, environmental impacts, food safety, and efficiency. we we increase pork products in china, producing five times as many hogs as we do and uses barriers to keep u.s. pork out of their country.
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can the country adopt smithfield's excellent technology and practices, they will increase exports to japan, our largest export market, in competition with u.s. products. most importantly, will we see volatility in prices and other long-term economic impacts? in the short term, i know this deal looks good for our producers. this also needs to be a good deal in the long term. it's our responsibility to ask the right questions to make sure we're thinking in the long term about these issues. that's why we're here. one pork company alone might not be enough to affect our national security, but it's our job to think about the big picture, and the long term for american food security and economic security, because as we all know on this committee, and we all said so much times, food security is a
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part of our national security. i'd now like to turn to my good friend and ranking member, senator koch cochran, and i appreciate very much your leadership on the committee. >> madam chairman, thank you for holding this hearing. we are very anxious to learn more about the facts with respect to the proposed transaction that committee will be considering today. we want to thank you, madam chairman, for your leadership. committee and the example you have set by the passage of a farm bill that still has us beaming with pride over the success of that overtaking. we, likewise, think it's important to follow your leadership again in the analysis and review of this proposed
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transaction of smithfield foods and because, first of all, it's one of the most widespread of the possible economic impact, transaction, or acquisition of a try cheese company in history. that's what we were being advised, but it's questions that flow from that that bring us to this point, and we're anxious for our witnesses to touch on that, and things that we should know so we will appreciate the economic consequences for our country as well as the possible benefits that will flow to the individual companies that are involved. we have long benefited from
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investments overseas, and we hope to make some assurances or draw some conclusions about the consequences in advance of this transaction that is under review today. we're prod of our american agriculture producers and our food processers and distributers. we have the best in the world, and we're proud of that, and we want to keep it that way. today, we're here to listen to our witnesses to help better acquaint us to what we think we need to know. thank you for your cooperation with our committee. >> let me introduce each of you, senator brown is going to introduce one of the witnesses, and then we will ask each of you
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to speak for five minutes, and you can have follow-up testimony you'd like to give us, we'd welcome as well. i'll introduce them, but the first witness on the panel is the president and ceo of smithfield foods who served as president and chief executive officer of the company since 2006, served as president and chief operating officer from 2001 to 2006 and vice president and chief financial officer from 2000 to 2001. has a 30-year career at the company, spans a variety of senior management roles and responsibilities which provide an in-depth knowledge of the company and broad experience in operational accounting and risk management matters. we welcome you today. our second witness on the pam is dr. matthew slaughter, associate dean at tech school of business at dartmouth college. he joined the faculty in 1994
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focusing his research on the economics and politics of globalization, from 2005-2007, he served as a member of the council of economic advisers for president bush. he's focused on global operations of multinational firms and labor market impacts of international trade and investment. we welcome you as well today. our third witness is dr. haley, professor of management, director of robins center of global business and strategy at west virginia university. dr. haley's extensive research including 200 articles, presentations, multiple books that explore companies and businesses -- business environments in india, china, southeast asia, and mexico. her research on chinese subsidies supported trade regulations in the united states and european union. finally, i'd like to turn to
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senator brown for the last introduction. >> thank you, madam chair, and i want to introduce stan slain, commissioner of the u.s. china commission, third term on that commission, appointed by speaker boehner, worked in the ford white house a few years ago, and dan has an understanding, particularly good understanding, as you'll hear from the testimony, if you read if -- as you'll hear from his speaking today and see in the written testimony, seeing china both as the threat and the opportunity, both, that it can be and is to our country in terms of economics and in terms of national security with a particularly acute understanding of that, and i look forward to hearing him, also, as a former member of the ohio state board of trustees, and proudly always wears the pin signifying the seasons alike. thank you. >> senator brown, you had me up to that point as a university of michigan state graduate. i need my green and white op today, commissioner. [laughter] all right, welcome.
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>> good afternoon, chairwoman, ranking member, and members of the committee. i'm larry poe, the president and chief executive officer of smithfield foods, a company based in virginia. i appreciate the opportunity to often r offer testimony to the committee today, and i'll summarize the written testimony. we at smithfield are excited about the announced new partnership. the majority owner of china's largest pork processer provides enormous benefits for the two companies. for american manufacturing and american agriculture. it is a partnership that is all about growth and improving the agricultural environment in both the u.s. and commie -- china. they expect to help meet the growing demand for pork in china by exporting high quality pork products from the u.s.. this means increased capacity for u.s. producers.
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more jobs in processing and more exports for the u.s. economy. at the same time, we will continue to supply our same high quality renowned products to u.s. consumers as well as other markets around the world. in short, this partnership for growth is good for our business and for the producers and the suppliers with whom we work. the reaction from the u.s. agriculture community is overwhelmingly positive. from michigan, indiana, north carolina pork producers association, the north american meat association, industry leaders, and numerous individual producers have expressed support for this transaction. growth is also very good for smithfields' employees and our communities. we have a saying, it will be the same old smithfield only better. let me be clear. retaining the management team, its plant, and all its employees.
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they recognize smith field's best in class operations, outstanding food safety practices, and our 46,000 hard working employees. there should be no noticeable impact on how we do business operationally in america and around the world as a result of this acquisition, except that we plan to do more of it. they'll honor the collective bargaining agreements in place as well as benefit packages arrangements for nonrepresented employees. these commitments combined with the opportunities for growth created by this deal have elicited the support of the ufpw and our employees. with respect to agriculture, we expect this to drive growth, expansion for growers, and the entire u.s. pork industry. they own 400 hog farms, contracts with 200 farms across
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the country. we will maintain all contracts and arrangements, and this creates a terrific opportunity for growth in exports for u.s. hog farmers to expand to meet the growing chinese demand. the integrity of the brand, the safety of the u.s. food supply, and recognized effectiveness of the u.s. food safety standards are key drivers of value that we place on smithfield. our brands recognize as representing the highest wallet, safetiest, and most desired products throughout the world including china. our combined companies have every incentives to ensure the continued safety and excellence of our products and brands. this transaction is about exporting high quality meat from the u.s. to china to meet their growing demand. this will not result in any u.s. imports of food from china. moreover, food products imported into the u.s. are subject to
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rigorous inspections and controls by america's regulators to ensure integrity, safety, and wholesomeness. your u.s. pork producers are the best, the most efficient in the world. we have ought review of the acquisition from the committee on foreign investment in the u.s. with a transaction already undergoing a thorough review. i appreciate the opportunity to address the committee, and i welcome your questions. >> thank you very much. >> committee woman, ranking member, and fellow members, thank you very much for allowing me to testify on the timely and important issues of how foreign purchases of american companies affect jobs and economic strength. in my testimony, i have three main points together help explain the many benefits that the acquisition of smithfield foods should bring to stake holders and the employees and the broader u.s. economy.
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first, merger have been the main operation in america, and acquisitions of u.s. companies by foreign entities are an everyday reality in today's global economy. indeed, here in 2013, there's been 500 such acquisitions, about three every business day. these transactions have long been critical to the united states to benefit from inward foreign direct investments. for decades, the vast majority of new fdi into america has come in the form of mna transactions rather than field investments establishing a brand new company. from 1987-2006, the united states received $2 # trillion in new fdi, 88 #% accounted for by foreign companies bying american companies. the second main point in the system is that u.s. affiliates of global companies account for far less than 1% of u.s. businesses have long performed large shares of america's
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productivity enhancing activities leading to millions of the highways and jobs that america needs in the slow recovery from the great recession. in 2010, the u.s. subsidiaries of global companies produced 6% of all u.s. private sector output undertaking 14% of both nonresidential and private sector capital investments and total research and development accounting for 18% of u.s. exports and goods with $2 trillion from other u.s. companies. all activities contribute to millions of high paying jobs here in america. in 2011, the u.s. affiliates employeded 5.6 million workers in the united states at a per worker compensation of over $77,000, more than a third above u.s. average, and at higher unionization rates than in other u.s. companies. the third main point in the testimony is that all public information about the
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transaction indicates it benefits the stake holders and broader u.s. economy by maintaining a high innovation enterprise. a primary motivation is to access and learn from smithfield's expertise in a number of related areas like the strong management team, leading brand, and its vertically integrated business model. this motivation accords with the pattern of inward fdi into america. consistent with this historical pattern and as mr. pope explained, post acquisition, they plan to operate largely as it does today with all key leaders and management teams remain in place, all collective bar-- bargaining agreements in place, and no plants or facilities will be closed. there's nothing unusual about the transaction. what about the risks of the state owned enterprises? they are prominent in china, they are not one, and, n., stake holders in fact goldman sachs.
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what about risks to smithfield's intellectual property? ip theft in china is the gravest threat to the economic system and to innovative u.s. companies and workers at home. in this condition text, it's important to see the smithfield transaction offers exict -- exhibit a of the solution. an american company paid by a chinese company millions of dollars for ideas in a transparent market-based deal. indeed, they seek to employee expertise, product, and brand in china largely through boosting exports to china to better meet surging pork demand due to growth in chinese income families. this reduces the balance that reached a record $315 billion. there's nothing worry some about the food aspect of the transaction. like many other industry, in food manufacturing, global companies long played an important role in the u.s.
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economy. these food companies already today imemployee over 200,000 american workers. i'll close placing the transaction in the context of at american that today continues to confront too few jobs and little economic growth. the good news is there's a future in which america can create millions of good jobs connected to the world via international trade investment. should it ultimately go through a smooth purchase, that sends a valuable signal to china and the world that the united states welcome inward investment in a time where it's needed. thank you again for your time and interest in my testimony. i look forward to answering any questions you may have. >> thank you very much. dr. haley. >> good afternoon, committee members. i submitted my full statement to the committee, which i asked be part of the hearing record. i'm currently a professor and director of the robins center for global business and strategy, west virginia university. i have researchedded chinese business and global strategy for almost 15 years. the point of my testimony is
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that this takeover provides long term benefits to china, and short term benefits to shareholders. the medium and long term benefits, and industry and society are questionable and risks outweigh the benefits. it is a highly sub subsidized chinese private company. this largest takeover of an american by a chinese company will double the number number or jobs tied to direct chinese investment. as australian experiences with chie new show, problems arise. after the acquisition, smythe field will not trade publicly and information comes from chinese reports. this deal will affect food safety, how we do business, and compatibility with our policies. in china, politics trump economics. no free market exists for china's food products and arguments of efficiencies from global logistics fall short.
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when a negative extraalty like pollution exist like they do here, markets no longer set prices. u.s. pig farming is a consolidated modern industry with economies of scale. the chinese pork industry's fragmented, small scale, and low tech as in the chinese industries we studied. labor costs are very similar to food processing, under 7%, and scale economies matter, yet, in five years, china moves from net importer to larger manufacturer and exporter. we found subsidies give china the advantage. free loans, cheap raw materials, energy, and land. they get subsidies from the province just as competitor process of 36%. it is the largest employer in the province, and beijing's
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indigenous innovation policies subsidize played rearming, they may finance the take yoifer, another to help with exports. smithfield could become the lowest rung of the commodity supply chain, high volume manufacturing moves to china, leaving low value, low tech pork production here. they could insert local hogs and reexport processed foods back to the u.s. under the smithfield brand. evaluating this is difficult. the smithfield bed included new horizons founded by the former chinese prime minister's son. in china, reports of the relationship never tell the full story. the chairman, a member of china's national people's congress that formalizing the chinese communism party measures. they provide limit information on business government links. incomplete information could impact the stock market, company evaluations, pricing, and other food producers' competitive
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positions. there have. outrageous food safety violations. they said the chemical fed, and there's meat sold as toxic milk, ect., ect., 16,000 dead down the shanghai river in mar. open your refrigerator door, look inside, and nothing in there is made in china because american grument is the most competitive and efficient in the world. mr. pope is wrong. china shipped 4 billion pounds of food to the u.s. last year including the apple juice, fish, and more than 10% of frozen spinach. the u.s. is periodically banned numerous imported chinese food. supermarket display the country of origin, but restaurants do not. imported foods require no labeling. ip protection in china's poor, increased counterfit american food products lead to brand die lotion and loss of the market.
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chie new's encouraging buying foreign food assets and farms, and smithfield is the first and prepare for others in agriculture as a matter of national interest. for china, smithfield provides benefits with american land, water, brands, and technology. as argued, benefits to the shareholders are uncleared. in a conference call with animal is, the managing district districter said we want the business to be the same, but better. mr. pope mexicoed that sentiment, and they neither explainedded how it's better with technology or know-how, neither e elaborated on better r whom? the question you should be asking on behalf of the american people. thank you for the opportunity to appear here today. i stand ready to answer any questions. >> thank you very much. commissioner slap. >> chairman, ranking member, and members of the committee, thank you for the opportunity to appear today. prior to receiverring on the u.s. china commission, i owned and operated three plywood
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factories in china. the security review commission on which i servedded has not taken a position on this proposed transaction, and it's not made any public statement on it. the views i present today are my own. the purchase of smithfield is part of china's far reaching program of foreign investments aimed at gaining as much control of key foreign sources of supply as possible. i am concerned that many of the largest chinese enterprises maintain ties to the chinese government whether through direct ownership or control. access to massive government subsidies or personal links to the chinese communism party. it's important to understand the chinese government is behind china's global, economic expansion. why smithfield? with 21% of the world's population, china has only 7% of the productive farm land. the country suffers from severe water shortages in the northern
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half, and extensive surface water and air plews, and couple this with the growing demand for meat, you understand the enormous challenges faced by china's leadership and its agriculture industry. china does not have sufficient farmland to grow the feed stock required to produce the amount of meat and dairy dplanded by the citizens. china is op track to spend a record amount on the purchase of food assets and farms. the drive for dprument assets in south america, australia, africa, and other locations ignited concerns from lawmakers around the world. in my view, the purchase is the first of what i expect to be many into rural america. chie new's purchase is drip by two major factors. chinaments some control over the commodity price of pork. with smithfield's commanding domination of the pork industry, they can have some impact on pricing. number two, the chinese want smithfield's valuable technology in hog genetics, and they also
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have some of the most advanced meat processing technology and manure management techniques that foster industrial scale hog production. it's interesting to note that u.s. taxpayers help finance much of smithfield's growth in usda grants. now, i'd like to turn to the personal impact the purchase may have on the economy. number one, the takeover the smithfield exacerbates a pattern of u.s. trade relations taking hold over the past ten years whereby production is shifted to on owned by china so the detriment of u.s. workers and businesses raising the question of whether allowing a chinese company to dominate our pork processing industry is in the best interest of the united states. if this deal is approved, it opening the door for other purchase r for u.s. companies. our agriculture food sector is unusually concentrated with a few companies dominating the market in each link of our food chain. number two, another risk is that this deal does little to improve
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overall market access for u.s. pork. china is unlikely to abandon its policy of self-sufficiency meat production. a more likely result is a closed market, intro-company trade. given smithfield's massive output, it, alone, might suffice for the limited quota of u.s. park. number three, it's promoted as a way to facilitate exports to china, but they could export pork back to us, the adoption of smithfield hogs genetics and processing technology improve hog production in china and could reverse the global flow of pork products and begin export of chinese pork to the u.s.. they are expected to apply for approval to reexport pork products processed from imported u.s. hogs and may apply to shippedded pork from hogs raised in china. number four, providing competitive access technology and intellectual property could
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disadvantage our domestic hog industry here and globally. they are expected to adopt smithfield's hog genetic line that could weaken u.s. pork opportunities. they have extensive supply chain and distribution system in china and throughout asia with operations in japan and south korea. the merger improves the position of the mainland china processing plant by sharing u.s. technology and expertise and potentially allowing them to undercut u.s. pork exports to the pacific rim. it will limit the ability of other u.s. exports to get a foothold in the market. no conclusion, it's reasonable to expect a wave of chinese investments into our food and agricultural industry. as china becomes a global player and a fierce competitor in american markets, its political system and state capital ideology poses a threat. with that in mind, the commission made the following relation. congress examined foreign and
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direct investment from china into the united states and amended whether there's schiewrts to require a mandatory review of all transactions by chinese state owned or state controlled companies investing in the united states. number two, add a new economic benefits test to the existing national security test that swiftly administers, and three, prohillaryprohibits investment e same industry. thank you for allowing me to testify. >> thank you very much. to each of you. i'll start the questioning with something simple, if you can do yes or no, that would be great. that is, mr. pope, if this transaction happens and the reverse, would china allow smithfield to buy? >> senator, i'm not sure i'm an expert on reverse mergers into
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china so i yield to those of the panel with more expertise. i know there's u.s. acquisitions into china, and so i couldn't really answer the question one way or another. >> when you and i met, you talked about looking at you're buying a portion of their company, they're buying a portion of yours. there was an attempt at that. what happened there? >> we had a discussion about five years ago, about 20% of smith field and chairman juan and myself had that, and then over the period of time, that did not occur. i don't remember involve. -- involvement of the chinese government approving or disapproving or if they were aware of the conversations. i don't think there was regulatory bar yores to that. there was more business issues
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associated with that, and we had conversations since then. >> thank you. >> yes or no, could it happen in reverse? >> i don't know. i do know that china's amazing growth since 1978 came in basic sense by the government getting out of the business of running business. they had a complete command of the economy for decades, it's a work in process. >> okay. >> [inaudible] >> you have to turn the mic on, thank you. >> it would happen. that same question was raised in a blog, and they said no there as well. the reason is it's strategically important industry, and as most people in china know, the power of the state has been increasing vis-a-vis private interest in china as a pork proportion. >> okay.